Microsoft Is Crashing After Analysts Downgrade The Stock Thanks To Rough Earnings

AP
Now the going gets tough for Satya Nadella, the 11-month CEO of Microsoft.

Microsoft's stock is down about 9% Tuesday morning after a rough earnings report. Microsoft delivered decent numbers, meeting expectations on the top and bottom lines, but, as we previously reported, the underlying trends were worrisome.

Nomura analyst Rick Sherlund has downgraded the stock from buy to neutral, according to Street Insider, which has his report. Sherlund is the ax on Microsoft. He's been bullish on the stock for the past two years.

Monday night, Microsoft reported Windows revenue from PC manufacturers was down 13%. It also said that Windows was going to have a tough road ahead of it in general. Microsoft had benefited from companies upgrading from Windows XP to Windows 7 last year. But that cycle is over now.

This is part of the reason Sherlund is downgrading the stock: "We reduced estimates to reflect a significantly more challenging transition ahead, with difficult comparisons ahead for traditional Office and Windows given evidence of the end of the benefits realized over the past year from the Windows XP related PC refresh cycle, some mix issues driving lower ASP's, FX and macro issues in a few geographies."

Until now, things were going pretty smoothly for Nadella. The stock was up 30% since he took over as he instituted a number of changes investors had long wanted. But now, he's got to get down to the really tough task of growing Windows and Office in a world where those applications are less important than ever before.